All Forum Posts by: David C.

@Immanuel Sibero, I used to think Bay Area was expensive with our low cap rate, but we had a huge run up the last few years due to raising rent, a lot of investors benefited from what you have described.  The cap rate is low in calgary, but the cost of borrowing is also lower in Canada from what I have seen so far.  Imagine you can borrow @ 1.9% for your TX MFRs, you will be laughing all the way to the bank :) 

I look at the vacancy rate in Calgary, it is touching the 2009 & 1993 level, if you own MFRs and can survive this down cycle, assuming interest rate will stay at this level or lower, you will come out a winner. I think that's the reason why MFR sellers are not motivated to drop prices.

On the other hand, what if interest rates go into a different direction? Can you raise rent fast enough to cover your debt servicing? Calgary already had a huge run in rent increase by historical standard and is flattening out. I would love to hear from other Calgary investors.

@Immanuel Sibero  I understand what you are saying, the issue is that this building already being stabilized, and rent may not have room to grow in the near future.  The assumable loan is 1.9%, what do you do when it adjusts and you can only get a 3% mortgage?  How do you know if you can bump rent up another $200/units when you have climbing vacancy in the market? 

Also, the current going cap rate for this market according to the Colliers report is 5 to 5.25%.  How do you justify buying @ 3.24% as you are paying a premium already?

Maybe local investors from Calgary can give us more insight.

BTW, my friend did what you mentioned in the bay area, instead of selling, he did mostly refi cash out after stabilization.  https://www.biggerpockets.com/forums/223/topics/35...

@Taye N. is right.  I once bought a bathroom set from ikea and my contractor got so frustrated with it.  If you were to go to Uni-tiles in Hayward, you can also stop by Pacific flooring.  There pricing are pretty competitve with each other.   Bring your measurements, and they can give you a 3D drawing as well. 

@Jason Connolly, @Jamilla Mansoor & @Kyle Huffman I used to live in Calgary until year 2000.  If I were to start in Calgary, I would definitely house hack, buy a 1 to 4 units with basement, take adv of the low interest rate for primary resident, live in one unit and rent out the rest, do AirBnB or furnished rental if you have the time.  

One of my family members are thinking of moving back and retiring in Calgary, so I am looking at this  model to see if it will work for them.

@Sean Kollee, great insight of the Calgary MFR market, and I felt the same way when I was looking at the listed MFRs in Calgary, they are either over priced, cap rate not based on 45% expense ratio or need a tear down or redevelopment plan for highest and best exit like you mentioned. Congrats on your success but I think is much tougher for investors without the construction know how to break into that market.

I was able to google previous MFR sales report from an agent named Shane Melanson. Some deals actually look pretty decent, I suspected they are off-market, and whatever we see on MLS are leftovers.

He has a pretty good blog about the Calgary apartments market.  http://shanemelanson.com/research/

I used to live in Calgary and now in the bay area.  I was looking at MFRs in Calgary the last few months because one of my family members was thinking of investing.  The numbers just don't look good.  Here is an example, great apartments in good location, 3 blocks from SAIT, average rent is about $900, based on 45% expense ratio, cap rate is only about 2.65%.  I will need to bring rent to $1100 to get a 3.24% cap rate.  How do you justify paying 2.7M for this?  It has an assumable mortgage at 1.9%, but unless you get more rent upside, it is not worth it.  I poke around on Kajiji, $900 is about right for the current market.

@Chris Chang, what kind of numbers are you seeing in your Edmonton C neighborhood in term of cap rate & GRM?

@Haseeb Awan, what kind of numbers you are seeing in your area vs your US investment?  I remember you asked about the bay area few weeks ago.  

Hi @Chris Chang, what kind of return you are getting in Calgary?  I used to live there until year 2000.  It seems like the market is cooling and rent is dropping.  I was there few months ago and seems like the economy is not doing so well.

@Account Closed,   I have a feeling if they are willing to invite you to their houses, they are interested in selling AT THE RIGHT PRICE AND/OR TERMS.  Maybe they are just tire kickers, I would try to figure out what they really need or their pain point.

Also, figure out the highest and best use for the property.  I remember one of the very successful wholesalers in the bay area mentioned he couldn't buy stuff at discount in the peninsula due to hot market , but he always knew the highest and best use for the property so he still get good margin on his exit.

It is a amazing if you understand the local market, the other night we talked about a vacant Oakland's 6 units(3/1) MFR deal bought by another investor. It was listed for 1.3M last summer, we guesstimated he spent ~300K & 3-4 months to rehabbed it. After rehab, new asking rent ~ $3,500/month/unit, so new annual gross rent about 252K. How much equity he built based on new rent & how much can he refi cash out?

What kind of rent correction will we see during the next downturn?  According to Business insider, only 9% of the housing stock in SF are market rate.  If the rent you are receiving is already 20 or 30% below market, would the downturn even affect you?

@Moonhee Kim, check out Lake Merritt, Adams Point & Temescal if you found West Oakland too rough.